RTI pilot puff slammed by experts
An HMRC review hailing the successes of the RTI pilot scheme met a storm of criticism from payroll and software specialists who do not take such a rosy view of the online PAYE filing project.
Written as a summary of “the tangible benefits that crystallised as the pilot progressed”, the HMRC pilot scheme report flies in the face of front-line user experiences and the comptroller and auditor general’s report on HMRC’s accounts, which detailed several flaws in the RTI implementation.
The voluntary RTI pilot scheme started in April 2012, a year ahead of the mass roll-out of the mandatory scheme. It began with 283 employer volunteers, and the number was increased to 1,300 by July 2012. During this period, pilot scheme participants received extra hand-holding from HMRC officials ahead of an anticipated surge in November 2012, when up to 250,000 employers were expected to come on board the pilot.
Rather than handling the expected flood of 250,000 employers by November 2012, the total signed up was 66,240. As a result HMRC decided to focus the final months of the pilot on bringing on board the largest PAYE schemes to maximise the number of individual records being reported in real time and support the Universal Credit Pathfinder which began in April 2013.
In spite of this and other shortcomings in the testing regime, the HMRC report concluded: “Overall, the pilot boosted confidence that the process worked well and provided evidence that it would reduce administration burdens for employers.” Involving a mix of employer scheme sizes, different software users and payroll agents, the pilot allowed HMRC “to thoroughly test virtually all aspects of the new process between November 2012 and March 2013…
“The success of the national roll out of reporting PAYE in real time so far is based on the solid foundations laid by the success of expanding the RTI pilot into live running.”
The NAO had access to some of the same information as the internal HMRC pilot scheme report author, but did not reach the same conclusions. The audit report did, however, confirm the benefits of undertaking a serious testing programme. Identifying the duplicate records problem, for example, “demonstrates the value in undertaking such a pilot”, the NAO said.
But it is also worth noting that HMRC’s pilot scheme report does not mention some of the wider project management issues highlighted by the NAO: the lack of a solid system spec, management reporting requirements and accounting accreditation; no back-up servers or apparent business continuity testing; and budget over-runs, with nothing in the pot to pay for further changes that are needed as online reporting ramps up.
Several paragraphs in the HMRC report appear to contradict the findings of the NAO:
HMRC: “The pilot allowed HMRC to thoroughly test in live running the vast majority of the IT before the full roll out from April 2013.”
NAO: “The pilot covered the initial validation of employer records and submission of data files to HMRC. From April 2012, starter and leaver data has been transferred into the NPS system but testing of all data transfers from RTI to the NPS system and end-of year reconciliation processes only started in April 2013 after RTI’s live roll-out.”
Pilot scheme shortfall
HMRC: “The expansion of the pilot was a sound decision as it allowed more comprehensive coverage, fuller consultation and focused resolution of the issues that emerged. The findings enabled HMRC to better prepare employers for the national roll out from April 2013. Overall, the earlier resolution of issues flushed out and fixed, or mitigated, during the controlled pilot ramp up alleviated the later costs that both HMRC and employers would have faced.”
NAO: “The lower number of employer schemes participating meant that live employer volume testing in advance of the full roll-out in April 2013 was lower than originally anticipated.”
HMRC: “Management Information requirements must be agreed in advance and reporting arrangements should be clear and structured. In the early periods of testing, there is an intense thirst for knowledge to support the understanding of whether or not things are going well.”
NAO: “System requirements were identified towards the end of the pilot and were not included in the original business case. These issues do not impact an employer’s ability to submit data to HMRC using RTI but do result in weaknesses in HMRC’s ability to produce and report financial information about PAYE. HMRC is currently undertaking work to understand the extent to which failure to address these accounting issues could result in HMRC being unable to correctly allocate and account for some PAYE payments received from employers or to identify and collect amounts outstanding.”
Duplicated employment records
HMRC: “The majority of the duplicate records were created either as a result of employers changing payroll IDs without indicating, as is required under the RTI guidance, or as a result of (now corrected) payroll software errors in a small number of software packages. Each mistake automatically created a new employment. To reduce the incidence of duplicate employment records, additional functionality was implemented in April 2013 which improved data matching…. HMRC also undertook further engagement with the software industry to highlight the issue and strengthened the RTI guidance for employers and software developers.”
NAO: “The pilot covered the initial matching of employer records with those held by HMRC and the electronic submissions of payroll information. During the pilot year to April 2013, only starter and leaver data has been transferred into the NPS system and testing of the internal data interfaces between RTI and the NPS system, enabling the performance of end-of-year reconciliations, only started from April 2013 after the live roll-out of RTI. HMRC have developed methods to identify and correct such cases, and are working to address all cases from the pilot period. By the middle of May, HMRC had identified approximately 10,000 duplicates from 21m employments validated within RTI. This issue will continue as employers migrate on to RTI and HMRC.”
HMRC: During the pilot Debt Management and Banking (DMB) looked into debts arising from incorrect RTI returns and how this could be avoided. The team involved helped to educate employers and improve guidance and training for the rest of the HMRC. HMRC recognises that the transition to in year reconciliation of employer charges is ongoing. This is being monitored closely to improve the interaction HMRC has with employers, and to update guidance when required.”
NAO: Failure to address these accounting [system accreditation and control] issues could result in HMRC being unable to correctly allocate and account for some PAYE payments received from employers or to identify and collect amounts outstanding.”
Those points are merely scene setters. Payroll consultant Kate Upcraft posted a blog questioning numerous other points in the HMRC report. “If problems were identified and resolved why are there now so many reconciliation and coding issues?” she wrote.
“I am aware of discrepancies ranging from 1p to £1.2m. In what way have admin burdens been reduced? One of my clients has a full time administrator just dealing with RTI problems and workarounds on a salary of £25,000 pa.”
Where HMRC’s report talks about the extra resources put into handling employer queries during the RTI pilot scheme, Upcraft commented, “One of the biggest complaints from employers is the difficulty in speaking to anyone who knows anything about RTI, particularly about the reconciliation issues and that’s when an employer can get through at all!”
Software vendors, meanwhile, are disgruntled about having to shoulder the blame for reconciliation issues and the lack of clarity about technical issues and timely guidance from HMRC.
HMRC liaised with a customer user group (CUG) of representatives from professional and software organisations throughout the pilot, but Upcraft differed in her recollections of how the consultation worked.
“I have learned more from the NAO report than I have from CUG meetings in respect of ongoing issues,” she wrote. “The CUG has now been disbanded even though RTI is not yet fully live…
“Too often only pressure from the CUG led HMRC to publish information about ‘known errors’ - ie they were known to them but not the outside world. Before publication much time was wasted by employers and HMRC staff making/receiving calls about issues that had already been identified.”
After reading the HMRC review, AccountingWEB members will no doubt have their own observations to make about the quality of RTI information coming out of the tax department.
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AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.